<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_____________________________
Date of Report (Date of earliest event reported): December 3, 1996
OPTICAL SENSORS INCORPORATED
(Exact name of registrant as specified in its charter)
0-27600
(Commission File Number)
DELAWARE 41-1643592
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
7615 GOLDEN TRIANGLE DRIVE, SUITE A
MINNEAPOLIS, MINNESOTA 55344
(Address of principal executive offices) (Zip code)
(612) 944-5857
(Registrant's telephone number,
including area code)
_____________________________
<PAGE>
ITEM 5. OTHER EVENTS
------------
On December 3, 1996, the Board of Directors of Optical Sensors
Incorporated (the "Company") declared a dividend distribution of one preferred
stock purchase right (a "Right") for each outstanding share of the Company's
Common Stock, par value $.01 per share (the "Common Shares"), payable to
shareholders of record at the close of business on January 8, 1997 (the "Record
Date"). Each Right entitles the registered holder to purchase from the Company
at any time following the Distribution Date (as defined below) one one-
thousandth of a share (a "Preferred Share Fraction") of the Company's Series A
Junior Preferred Stock, par value $.01 per share (the "Preferred Shares"), or a
combination of securities and assets of equivalent value, at a purchase price of
$90.00 per Preferred Share Fraction (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") dated as of December 3, 1996, between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent.
Initially, the Rights will be evidenced, with respect to any of the Common
Share certificates outstanding as of the Record Date, by such Common Share
certificates, and no separate Rights Certificates will be distributed. The
Rights will separate from the Common Shares and will be distributed to the
holders thereof on the "Distribution Date," which shall be the first to occur of
the following: (i) the close of business on the tenth business day following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Shares, other than
as a result of a Permitted Offer, as defined (the "Stock Acquisition Date");
(ii) the close of business on the tenth business day (or such later date as the
Board of Directors, acting by a majority of the Continuing Directors, may
determine) following the commencement of a tender offer or exchange offer (other
than a Permitted Offer, as defined) that would result in a person or group
beneficially owning 15% or more of the outstanding Common Shares; or (iii) the
close of business on the tenth business day after a determination by at least a
majority of the Continuing Directors that a Person is an Adverse Person, and
that such Person, alone or together with its affiliates and associates, has
become the beneficial owner of a substantial amount of Common Shares (which
amount shall in no event be less than 12% of the Common Shares then outstanding)
and (a) such beneficial ownership by such Person is intended to cause the
Company to repurchase the Common Shares beneficially owned by such Person or to
cause pressure on the Company to take action or enter into a transaction or
series of transactions intended to provide such Person with short-term financial
gain under circumstances where at least a majority of the Continuing Directors
determines that the best long-term interests of the Company and its shareholders
would not be served by taking such action or entering into such transaction or
series of transactions at that time or (b) such beneficial ownership is causing
or reasonably likely to cause a material adverse impact (including, but not
limited to, impairment of relationships with customers or impairment of the
Company's ability to maintain its competitive position).
A "Permitted Offer" means a tender or exchange offer which is for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a majority
of the members of the Board who are Continuing Directors, who are not officers
of the Company and who are not Acquiring Persons or Affiliates, Associates,
nominees or representatives of an Acquiring Person, to be adequate and otherwise
in the best interests of the Company and its shareholders (other than the Person
or any Affiliate or Associate thereof on whose behalf the offer is being made).
A "Continuing Director" is (i) any person who is a member of the Board of
Directors prior to December 3, 1996, while such person is a member of the Board
of Directors, who is not an Acquiring Person or an Adverse Person, or an
affiliate or associate of either of the foregoing, or a representative or
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designee of an Acquiring Person or an Adverse Person or any such affiliate or
associate, or (ii) any person who subsequently becomes a member of the Board of
Directors who is not an Acquiring Person or an Adverse Person, or an affiliate
or associate of either of the foregoing, or a representative or designee of an
Acquiring Person, an Adverse Person or any such affiliate or associate, and
whose nomination or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors.
Until the Distribution Date, (i) the Rights will be evidenced by Common
Share certificates and will be transferred with and only with such Common Share
certificates, (ii) new Common Share certificates issued after January 8, 1997
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificate for Common Shares
outstanding will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 2, 2006, unless earlier redeemed or
exchanged by the Company as described below (the earliest of all such dates, the
"Expiration Date").
As soon as practical after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Shares as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. All Common Shares issued prior to the earlier of the
Distribution Date and the Expiration Date will be issued with Rights. Common
Shares issued after the Distribution Date upon the exercise of employee stock
options, issuances under other employee stock benefit plans or the conversion of
convertible securities issued prior to the Distribution Date will be issued with
Rights.
In the event (i) that a person or group, with certain exceptions, becomes
the beneficial owner of more than 15% of the then outstanding Common Shares,
other than as a result of a Permitted Offer or (ii) at least a majority of the
Continuing Directors determines that a person is an Adverse Person, then each
holder of a Right will thereafter have the right to receive, upon exercise, that
number of Preferred Share Fractions (or in certain circumstances, that number of
Common Shares, cash, property or other securities of the Company) having a
market value equal to two times the Exercise Price of the Right. The Rights,
however, are not exercisable following the occurrence of either of the events
set forth above until such time as the Rights are no longer redeemable by the
Company as set forth below. Notwithstanding any of the foregoing, following the
occurrence of either of the events set forth above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or Adverse Person (or certain related
persons and transferees) will be null and void. The events set forth in this
paragraph are referred to as "Section 11(a)(ii) Events."
In the event that, at any time following the Stock Acquisition Date, other
than pursuant to a Permitted Offer, (i) the Company is acquired in a merger or
other business combination transaction in which the Company is not the surviving
corporation or the Common Shares are changed or exchanged or (ii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive that number of shares of common stock of
the acquiring company which equals the exercise price of the Right divided by
one-half of the current market price of such common stock at the date of the
occurrence of the event. The events set forth in this paragraph are referred to
as "Section 13 Events," and the Section 11(a)(ii) Events and the Section 13
Events are collectively referred to as the "Triggering Events."
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At any time after the occurrence of a Section 11(a)(ii) Event, at the
election of a majority of the Continuing Directors, the Company may exchange the
Rights (other than Rights which have become void), in whole or in part, at an
exchange ratio of one Preferred Share Fraction per Right (subject to
adjustment).
The Purchase Price payable and the number of Preferred Share Fractions
issuable upon exercise of the Rights are subject to adjustment from time to time
to prevent dilution (i) in the event of a stock dividend on, or a subdivision,
split, combination, consolidation or reclassification of, the Preferred Shares,
(ii) if all holders of any security of the Company are granted rights, options
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares, or
(iii) upon the distribution to holders of Preferred Shares of evidences of
indebtedness or assets (excluding quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company will not be required to issue fractional Preferred Shares
other than fractions which are integral multiples of Preferred Share Fractions
(or, in the event of an appropriate election, Common Shares) and, in lieu of
such fractional Preferred Shares (or Common Shares, as the case may be), an
adjustment in cash will be made based on the market price of the Preferred
Shares on the last trading date prior to the date of exercise.
In general, at any time prior to the first to occur of (i) ten days
following the Stock Acquisition Date, (ii) ten days after a person is determined
to be an Adverse Person, or (iii) the Final Expiration Date, the Company, acting
by a majority of the Continuing Directors, may redeem the Rights in whole, but
not in part, at a price of $.001 per Right (payable in cash, stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
redemption of the Rights, the Rights will terminate and the only right of the
holders of the Rights will be to receive the $.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or receive dividends. The creation of the Rights should not be taxable
to shareholders. Shareholders may, however, depending upon the circumstances,
recognize taxable income in the event that the rights become exercisable for
Preferred Shares (or other consideration) of the Company or for common stock of
an acquiring company as set forth above.
Any of the provisions of the Rights Agreement, including the definition of
Acquiring Person or the Purchase Price, may be amended by at least a majority of
the Continuing Directors prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by at least a
majority of the Continuing Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or Adverse Person), or to
shorten or lengthen certain time periods under the Rights Agreement. However,
no amendment to adjust the time period governing redemption can be made at such
time as the Rights are not redeemable.
As of December 3, 1996, there were 8,339,311 Common Shares outstanding
and 1,300,323 Common Shares reserved for issuance under outstanding warrants and
various stock-based compensation plans of the Company. Each outstanding Common
Share on January 8, 1997 will receive one Right. So long as the Rights
Agreement remains in effect and the Rights continue to remain attached to and
trade with the Common Shares, the Company will issue one Right for each Common
Share issued between the Record Date and any Distribution Date, so that all
outstanding shares will have attached Rights.
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Assuming the Company has initially reserved for issuance upon exercise of the
Rights 250,000 Preferred Shares.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should
not interfere with any merger or other business combination approved by at least
a majority of the Continuing Directors of the Company because the Continuing
Directors may, at their option, either (i) declare the transaction to be a
"Permitted Offer," or (b) at any time before the close of business on the 10th
business day following the Stock Acquisition Date or the date on which a person
is determined to be an Adverse Person, redeem the then outstanding Rights at the
redemption price.
ITEM 7. EXHIBITS.
4.1 Form of Rights Agreement, dated as of December 3, 1996, between
Optical Sensors Incorporated and Norwest Bank Minnesota, N.A.,
which includes as Exhibit B the form of Rights Certificate (filed
herewith electronically). Pursuant to the Rights Agreement,
printed Rights Certificates will not be mailed until as soon as
practicable after the Distribution Date (as defined therein).
99.1 Press Release dated December 4, 1996 (filed herewith
electronically).
4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 6, 1996 OPTICAL SENSORS INCORPORATED
By:/s/ Sam B. Humphries
______________________________
Sam B. Humphries
Chief Executive Officer
5
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<TABLE>
<CAPTION>
INDEX TO EXHIBITS
-----------------
<S> <C> <C>
ITEM
- ----
NO. DESCRIPTION METHOD OF FILING
- --- ----------- ----------------
4.1 Rights Agreement, dated as
of December 3, 1996, between Optical
Sensors Incorporated, and Norwest Bank
Minnesota, N.A., and all exhibits thereto,
which include as Exhibit B the form of
Rights Certificate. Pursuant to the
Rights Agreement, printed Rights
Certificates will not be mailed until as
soon as practicable after the Distribution
Date (as defined therein).................. Filed herewith
electronically.
99.1 Press Release dated December 4, 1996....... Filed herewith
electronically.
</TABLE>
<PAGE>
EXHIBIT 4.1
RIGHTS AGREEMENT
BETWEEN
OPTICAL SENSORS INCORPORATED
AND
NORWEST BANK MINNESOTA, N.A.
DATED AS OF DECEMBER 3, 1996
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Section Page
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<C> <S> <C>
1. Certain Definitions.............................................. 1
2. Appointment of Rights Agent...................................... 6
3. Issue of Rights Certificates..................................... 6
4. Form of Rights Certificates...................................... 8
5. Countersignature and Registration................................ 9
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates..................................................... 10
7. Exercise of Rights; Purchase Price; Expiration Date.............. 10
8. Cancellation and Destruction of Rights Certificates.............. 12
9. Reservation and Availability of Capital Stock; Registration...... 12
10. Capital Stock Record Date........................................ 14
11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights................................................. 14
12. Certificate of Adjusted Purchase Price or Number of Shares....... 21
13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power............................................................ 21
14. Fractional Rights and Fractional Shares.......................... 23
15. Rights of Action................................................. 25
16. Agreement of Rights Holders...................................... 25
17. Rights Certificate Holder Not Deemed a Shareholder............... 26
18. Concerning the Rights Agent...................................... 26
19. Merger or Consolidation or Change of Name of Rights Agent........ 26
20. Duties of Rights Agent........................................... 27
21. Change of Rights Agent........................................... 29
22. Issuance of New Rights Certificates.............................. 30
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C>
23. Redemption and Termination....................................... 30
24. Exchange......................................................... 31
25. Notice of Certain Events......................................... 32
26. Notices.......................................................... 33
27. Supplements and Amendments....................................... 34
28. Successors....................................................... 34
29. Determinations and Actions by the Board.......................... 34
30. Benefits of this Agreement....................................... 35
31. Severability..................................................... 35
32. Governing Law.................................................... 35
33. Counterparts..................................................... 36
34. Descriptive Headings............................................. 36
</TABLE>
Exhibits
A - Form of Certificate of Designation, Preferences and Rights of Series A
Junior Preferred Stock
B - Form of Rights Certificate
C - Summary of Rights Agreement
<PAGE>
RIGHTS AGREEMENT
----------------
This RIGHTS AGREEMENT, dated as of December 3, 1996 (this "Agreement"), is
between Optical Sensors Incorporated, a Delaware corporation (the "Company"),
and Norwest Bank Minnesota, N.A., a national banking association, as Rights
Agent (the "Rights Agent").
On December 3, 1996 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company (as the composition of Board of Directors may change
from time to time, the "Board") authorized and declared a dividend distribution
of one Right for each Common Share (as hereinafter defined) of the Company
outstanding at the close of business (as hereinafter defined) on January 8, 1997
(the "Record Date"), each Right (individually a "Right" and collectively the
"Rights") initially representing the right to purchase one one-thousandth of a
Preferred Share (as hereinafter defined) of the Company having the rights,
powers and preferences set forth in the form of the Certificate of Designation,
Preferences and Rights attached hereto as Exhibit A, upon the terms and subject
to the conditions hereinafter set forth, and has further authorized and directed
the issuance of one Right for each Common Share issued between the Record Date
and the earlier of the Distribution Date or the Expiration Date (both as
hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
Section 1. Certain Definitions.
For purposes of this Agreement, the following terms have the
meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, alone or
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding
(other than as a result of a Permitted Offer (as hereinafter defined)), but
shall not include the Company, any Subsidiary of the Company, or any
employee benefit plan of the Company or of any Subsidiary of the Company or
any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan. Notwithstanding the foregoing, no
Person shall become an "Acquiring Person": (i) as the result of an
acquisition of Common Shares by the Company which, by reducing the number
of Common Shares outstanding, increases the proportionate number of Common
Shares beneficially owned by such Person to 15% or more of the Common
Shares then outstanding; provided, however, that if a Person shall become
the Beneficial Owner of 15% or more of the Common Shares then outstanding
by reason of Common Share purchases by the Company and shall thereafter
become the Beneficial Owner of any additional Common Shares, other than
pursuant to the receipt of stock dividends or stock splits on a pro rata
basis on Common Shares already beneficially owned by such Person, then such
Person shall be deemed to be an "Acquiring Person"; or (ii) who
beneficially owns 15% or more of the outstanding Common Shares but who
acquired Beneficial Ownership of Common Shares without any plan or
intention to seek or affect control of the Company, if such Person promptly
enters into an irrevocable commitment promptly to divest, and thereafter
promptly divests (without exercising or retaining any power, including
voting, with respect to such shares), sufficient shares of Common Shares
(or securities convertible into, exchangeable into or exercisable for
Common Shares) so that such Person ceases to be the Beneficial Owner of 15%
or more of the outstanding shares of Common Shares; or (iii) who
beneficially owns Common Shares consisting solely of one or more (A) Common
Shares beneficially owned pursuant to the grant for exercise of an option
granted to
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such Person by the Company in connection with an agreement to merge with,
or acquire, the Company entered into prior to a Section 11(a)(ii) Trigger
Date, (B) Common Shares (or securities convertible into, exchangeable into
or exercisable for Common Shares), beneficially owned by such Person or its
Affiliates or Associates at the time of grant of such option or (C) Common
Shares (or securities convertible into, exchangeable into or exercisable
for Common Shares) acquired by Affiliates or Associates of such Person
after the time of such grant which, in the aggregate, amount to less than
1% of the outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii).
(d) "Adverse Person" shall mean any Person determined to be an Adverse
Person pursuant to the criteria set forth in Section 11(a)(ii)(B).
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act as in effect on the date hereof.
(f) "Agreement" shall have the meaning set forth in the preamble
clause at the beginning hereof.
(g) "Beneficial Owner" shall mean the following:
(i) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(A) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, beneficially owns;
(B) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, whether or not in
writing (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights,
other rights, warrants or options or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," (1) securities tendered pursuant to a tender or exchange offer made
by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, (2) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event, or (3) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 (the "Original Rights") or pursuant to Section
11(i) in connection with an adjustment made with respect to any Original
Rights;
(C) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right (sole or shared) to vote
or dispose of or has "beneficial ownership" of (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act, or
any comparable or successor rule, whether or not the
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Company is subject to the Exchange Act), including, without limitation, pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this Section 1(g)(i)(C) as a result
of an oral or written agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding (1) arises solely from
a revocable proxy given in response to a proxy or consent solicitation made
pursuant to and in accordance with, the applicable provisions of the General
Rules and Regulations under the Exchange Act (and if such provisions are not
applicable by law such proxy or solicitation is made in substantially the same
manner as if such provisions were applicable), and (2) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report) (and if the Company is not subject to the
Exchange Act, would not be then reportable if the Company was subject to the
Exchange Act); or
(D) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding, whether or not in writing, for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in Section
1(g)(i)(C)(1)) or disposing of such securities.
(ii) Notwithstanding anything in this definition to the contrary, the
phrase "then outstanding," when used with reference to a Person's Beneficial
Ownership of securities, shall mean the number of such securities then issued
and outstanding together with the number of such securities not then actually
issued and outstanding which such Person is deemed to own beneficially
hereunder.
(h) "Board" shall have the meaning set forth in the recital clause at
the beginning of this Agreement.
(i) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Minnesota are authorized or
obligated by law or executive order to close.
(j) "Close of business" on any given date shall mean 5:00 p.m. Minneapolis,
Minnesota time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m. Minneapolis, Minnesota time on the next
succeeding Business Day.
(k) "Common Shares" when used with reference to the Company shall mean the
shares of Common Stock, par value $.01 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall
mean: (i) in the case of Persons organized in corporate form, the shares of
capital stock or units of equity security with the greatest voting power of such
Person or, if such Person is a Subsidiary of another Person, of the Person or
Persons which ultimately control or direct the management of such first-
mentioned Person, and (ii) in the case of Persons not organized in corporate
form, the units of beneficial interest which (A) represent the right to
participate generally in the profits and losses of such Person (including
without limitation any flow-through tax benefits resulting from an ownership
interest in such Person) and (B) are entitled to exercise the greatest voting
power of such Person or, in the case of a limited partnership, shall have the
power to remove the general partner or partners.
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(l) "Common stock equivalents" shall have the meaning set forth in
Section 11(a)(iii).
(m) "Company" shall have the meaning set forth in the preamble clause
at the beginning of this Agreement.
(n) "Continuing Director" shall mean (i) any Person who is a member of
the Board, while such Person is a member of the Board, who is not an Acquiring
Person or an Adverse Person, or an Affiliate or Associate of any such Person, or
a representative or designee of an Acquiring Person or an Adverse Person or of
any such Affiliate or Associate, and was a member of the Board prior to the date
of this Agreement, or (ii) any Person who subsequently becomes a member of the
Board, while such Person is a member of the Board, who is not an Acquiring
Person or an Adverse Person, or an Affiliate or Associate of any such Person, or
a representative or designee of an Acquiring Person or an Adverse Person or of
any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the Continuing
Directors.
(o) "Current Market Price" shall have the meaning set forth in Section
11(d).
(p) "Current Value" shall have the meaning set forth in Section 11(a)(iii).
(q) "Distribution Date" shall have the meaning set forth in Section 3(a).
(r) "Equivalent preferred shares" shall have the meaning set forth in
Section 11(b).
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(t) "Exchange Ratio" shall have the meaning set forth in Section 24(a).
(u) "Expiration Date" shall have the meaning set forth in Section 7(a).
(v) "Final Expiration Date" shall mean the close of business on
December 2, 2006.
(w) "Original Rights" shall have the meaning set forth in Section
1(g)(i)(B)(3).
(x) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(y) "Permitted Offer" shall mean a tender or exchange offer which is
for all outstanding Common Shares at a price and on terms determined, prior to
the purchase of shares under such tender or exchange offer, by at least a
majority of the members of the Board who are Continuing Directors, who are not
officers of the Company and who are not Acquiring Persons or Affiliates,
Associates, nominees or representatives of an Acquiring Person, to be adequate
(taking into account all factors that such directors deem relevant including,
without limitation, prices that could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum value) and
otherwise in the best interests of the Company and its shareholders (other than
the Person or any Affiliate or Associate thereof on whose behalf the offer is
being made), taking into account all factors that such directors may deem
relevant.
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(z) "Preferred Share" shall mean a share of Series A Junior Preferred
Stock, par value $.01 per share, of the Company and, to the extent that there
are not a sufficient number of shares of Series A Junior Preferred Stock
authorized to permit the full exercise of the Rights, shares of any other series
of Preferred Stock of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior Preferred Stock.
(aa) "Preferred Share Fraction" shall mean one one-thousandth of a
Preferred Share.
(bb) "Principal Party" shall have the meaning set forth in Section 13(b).
(cc) "Purchase Price" shall have the meaning set forth in Section 4(a), and
shall initially be as set forth in Section 7(b).
(dd) "Record Date" shall have the meaning set forth in the recital clause
at the beginning of this Agreement.
(ee) "Redemption Price" shall have the meaning set forth in Section 23(a).
(ff) "Rights" shall have the meaning set forth in the recital clause at the
beginning of this Agreement.
(gg) "Rights Agent" shall have the meaning set forth in the preamble clause
at the beginning of this Agreement until a successor Rights Agent shall have
become such pursuant to the applicable provisions of this Agreement, and
thereafter "Rights Agent" shall mean such successor Rights Agent. If at any time
there is more than one Person appointed by the Company as Rights Agent pursuant
to the provisions of this Agreement, "Rights Agent" shall mean and include each
such Person.
(hh) "Rights Certificates" shall have the meaning set forth in Section
3(a).
(ii) "Rights Dividend Declaration Date" shall have the meaning set forth in
the recital clause at the beginning of this Agreement.
(jj) "Section 11(a)(ii) Election" shall mean the election described in
Sections 11(a)(ii)(x) and (y).
(kk) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii)(A) or (B).
(ll) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii).
(mm) "Section 13 Event" shall mean any event described in clauses (i),
(ii) or (iii) of Section 13(a).
(nn) "Section 24(a) Election" shall have the meaning set forth in
Section 24(a).
(oo) "Spread" shall have the meaning set forth in Section 11(a)(iii).
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<PAGE>
(pp) "Stock Acquisition Date" shall mean the date of first public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(qq) "Subsidiary" shall mean, with reference to any Person, any other
Person of which at least a majority of the voting power of the voting equity
securities or equity interests is beneficially owned, directly or indirectly, or
otherwise controlled by such first-mentioned Person.
(rr) "Substitute Consideration" shall have the meaning set forth in
Section 11(a)(iii).
(ss) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii).
(tt) "Trading Day" shall have the meaning set forth in Section 11(d)(i).
(uu) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of Common Shares) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
additional Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the first to occur of:
(i) the close of business on the tenth Business Day after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date
occurs before the Record Date, the close of business on the Record Date),
(ii) the close of business on the tenth Business Day (or such later
date as may be determined by the Board, acting by a majority of the Continuing
Directors, prior to such time as any Person has become an Acquiring Person)
after the date that a tender or exchange offer (other than a Permitted Offer) by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act (or any comparable or successor rule), if upon consummation thereof, such
Person would be the Beneficial Owner of 15% or more of the Common Shares then
outstanding, or
(iii) the close of business on the tenth Business Day after a
determination, pursuant to Section 11(a)(ii)(B), that a Person is an Adverse
Person,
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(the first to occur of (i), (ii), and (iii) being herein referred to as the
"Distribution Date"), (A) the Rights will be evidenced (subject to the
provisions of Section 3(b)) by the certificates for the Common Shares
registered in the names of the holders thereof (which certificates for
Common Shares shall be deemed also to be certificates for Rights) and not
by separate certificates and (B) the Rights will be transferable only in
connection with the transfer of the underlying Common Shares (including a
transfer to the Company). As soon as practicable after the Company has
notified the Rights Agent of the occurrence of the Distribution Date, the
Rights Agent will send by first-class, insured, postage prepaid mail, to
each record holder of Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of
the Company, one or more Rights certificates, in substantially the form of
Exhibit B hereto (the "Rights Certificates"), evidencing one Right for each
Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been
made pursuant to Section 11(p), at the time of distribution of the Right
Certificates, the Company shall make and notify the Rights Agent of the
necessary and appropriate rounding adjustments (in accordance with Section
14(a)) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights.
As of and after the Distribution Date, the Rights will be evidenced solely
by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights Agreement, in substantially the
form attached hereto as Exhibit C, by first-class, postage prepaid mail, to
each record holder of Common Shares as of the close of business on the
Record Date at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Shares outstanding as
of the Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates for the Common Shares and the registered
holders of the Common Shares shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing Common
Shares in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such Common Shares.
Certificates issued after the Record Date upon the transfer of Common
Shares outstanding on the Record Date shall bear the legend set forth in
Section 3(c).
(c) Rights shall be issued in respect of all Common Shares which are
issued after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date. Rights shall also be issued to the extent
provided in Section 22 in respect of all Common Shares which are issued
after the Distribution Date and prior to the Expiration Date. Certificates
representing Common Shares (including, without limitation, certificates
issued upon transfer or exchange of Common Shares) issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration
Date shall also be deemed to be certificates for the associated Rights, and
shall bear the following legend:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between Optical Sensors Incorporated (the
"Company") and Norwest Bank Minnesota, N.A. (the "Rights
Agent") dated as of December 3, 1996 (the "Rights
Agreement"), and as the same may be amended from time to
time, the terms of which (including restrictions on the
transfer of such Rights) are hereby incorporated herein by
reference and a copy of which is on file at the principal
executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights will be
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<PAGE>
evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the
holder of this certificate a copy of the Rights Agreement,
as in effect on the date of mailing, without charge after
receipt of a written request therefor from such holder.
Under certain circumstances, as set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person, an Adverse Person or any
Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), and any subsequent holder of such
Rights, whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and
void."
Until the earlier of the Distribution Date or the Expiration Date, the
Rights associated with the Common Shares represented by certificates for
Common Shares shall be evidenced by such certificates alone and registered
holders of Common Shares shall also be the registered holders of the
associated Rights, and the transfer of any of such certificates shall also
constitute the transfer of the Rights associated with such Common Shares,
whether or not containing the foregoing legend. In the event that the
Company purchases or acquires and cancels any Common Shares after the
Record Date but prior to the earlier of the Distribution Date or the
Expiration Date, any Rights associated with such Common Shares shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares that are no longer
outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to exercise,
certification and assignment to be printed on the reverse thereof) shall
each be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange, national market system or over-the-counter market on
which the Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Section 11 and Section 22, the Rights
Certificates, whenever distributed, shall entitle the holders thereof to
purchase such number of Preferred Share Fractions as shall be set forth
therein at the price per Preferred Share Fraction set forth therein (the
"Purchase Price"), but the amount and type of securities purchasable upon
the exercise of each Right and the Purchase Price thereof shall be subject
to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 that represents Rights beneficially owned by a Person reasonably
believed by at least a majority of the Continuing Directors to be (i) an
Acquiring Person, an Adverse Person or any Associate or Affiliate of any
such Person, (ii) a transferee of an Acquiring Person or an Adverse Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person or Adverse Person becomes such, or (iii) a transferee of
an Acquiring Person or an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person or Adverse Person (or from any such Associate or
Affiliate) to holders of equity interests in such Acquiring Person or
Adverse Person (or any such Associate or Affiliate) or to any Person with
whom suc h
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<PAGE>
Acquiring Person or Adverse Person (or any such Associate or Affiliate) has
any continuing oral or written plan, agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which at
least a majority of the Continuing Directors has determined is part of an
oral or written plan, arrangement or understanding that has as a primary
purpose or effect avoidance of Section 7(e), and any Rights Certificate
issued to any such Person pursuant Section 6 or Section 11 upon transfer,
exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend, modified as applicable to such Person:
"The Rights represented by this Rights Certificate are or
were beneficially owned by a person who was or became an
[Acquiring] [Adverse] Person or an Affiliate or Associate of
an [Acquiring] [Adverse] Person (as such terms are defined
in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become
null and void in the circumstances specified in Section 7(e)
of such Agreement."
The provisions of Section 7(e) of this Agreement shall be operative whether
or not the foregoing legend is contained on any such Rights Certificate.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its Chief Financial Officer or any
Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof, if any, which
shall be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company
who shall have signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the
person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificates may be signed on behalf
of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated by the Rights Agent as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, the date of each
of the Rights Certificates and whether each such Rights Certificate
contains a legend as set forth in Section 4(b).
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<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e),
Section 14 and Section 20(k), at any time after the close of business on
the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates may be transferred,
split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of
Preferred Share Fractions (or, following a Triggering Event, Common Shares,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate
or Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged, with the form of assignment
and certificate appropriately executed, at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall
be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall
have duly completed and executed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent shall, subject
to Section 4(b), Section 7(e), Section 14 and Section 20(k), countersign
and deliver to each Person entitled thereto a Rights Certificate or
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any transfer tax or charge that may be
imposed in connection with any transfer, split up, combination or exchange
of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and,
at the Company's or the Rights Agent's request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will make and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date.
---------------------------------------------------
(a) Subject to Section 7(e), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein, including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section
23(a)) in whole or in part, at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to exercise
and the certificate on the reverse side thereof duly completed and
executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the aggregate Purchase Price for
the total number of Preferred Share Fractions (or Common Shares, other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the first to occur
of: (i) the Final Expiration Date; (ii) the time at which such Rights
expire as provided in Section 13(d); (iii) the time at which such Rights
are redeemed as provided in
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<PAGE>
Section 23; or (iv) the time at which such Rights are exchanged as provided
in Section 24 (the first to occur of (i), (ii), (iii) and (iv) being herein
referred to as the "Expiration Date").
(b) The Purchase Price for each Preferred Share Fraction purchasable
pursuant to the exercise of a Right shall initially be $90.00 and shall be
subject to adjustment from time to time as provided in Section 11 and
Section 13(a) and shall be payable in accordance with Section 7(c).
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to exercise and certificate on the
reverse side thereof duly completed and executed, accompanied by payment of
the Purchase Price for the number of Preferred Share Fractions (or Common
Share, other securities, cash or other assets, as the case may be) to be
purchased and an amount equal to any applicable transfer tax or charge, the
Rights Agent shall, subject to Section 14(b) and Section 20(k), thereupon
promptly (i) requisition from any transfer agent of the Preferred Shares
(or make available, if the Rights Agent is the transfer agent for such
Preferred Shares) certificates for the total number of Preferred Shares to
be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14, (iii) promptly after receipt of such
certificates, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) promptly after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as
such amount may be reduced pursuant to Section 11(a)(iii)) may be made by
cash, certified bank check or money order payable to the order of the
Company. If the Company determines to issue other securities of the
Company (including without limitation, upon an appropriate Section
11(a)(ii) Election or Section 24(a) Election, Common Shares), pay cash
and/or distribute other assets pursuant to Section 11(a), the Company will
make all arrangements necessary so that such other securities, cash and/or
other assets are available for distribution by the Rights Agent, if and
when appropriate. The Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a
number of Rights be exercised so that only whole Preferred Shares would be
issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, subject to the provisions of
Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
that are or were beneficially owned by (i) an Acquiring Person, an Adverse
Person or any Associate or Affiliate of any such Person, (ii) a transferee
of an Acquiring Person or an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person or an
Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person or Adverse
Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or
Adverse Person (or from any such Associate or Affiliate) to holders of
equity interests in such Acquiring Person or Adverse Person (or any such
Associate or Affiliate) or to any Person with whom the Acquiring Person or
Adverse Person (or
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<PAGE>
any such Associate or Affiliate) has any continuing oral or written plan,
agreement, arrangement or understanding regarding the transferred Rights or
(B) a transfer which at least a majority of the Continuing Directors has
determined is part of an oral or written plan, agreement, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and any
holder of such Rights shall have no rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to ensure that the provisions of
this Section 7(e) and Section 4(b) are complied with, but shall have no
liability to any holder of a Rights Certificate or other Person as a result
of its failure to make any determinations with respect to an Acquiring
Person or Adverse Person or any of their respective Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of any
purported transfer or exercise as set forth in this Section 7 unless such
registered holder shall have (i) duly completed and executed the
certificate following the form of assignment or election to exercise set
forth on the reverse side of the Rights Certificate surrendered for such
assignment or exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no Rights Certificates shall be issued in
lieu thereof except as expressly permitted by this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate
purchased or acquired by the Company otherwise than upon the exercise
thereof. The Rights Agent shall deliver all cancelled Rights Certificates
to the Company, or shall, at the written request of the Company, destroy
such cancelled Rights Certificates in accordance with the rules and
regulations of the Securities and Exchange Commission, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock; Registration.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available for issuance upon the exercise of outstanding
Rights as many of its authorized and unissued Preferred Shares (and,
following the occurrence of a Triggering Event, if applicable, out of its
authorized and unissued Common Shares and/or other securities or out of its
authorized and issued shares held in its treasury), which together at all
times after the Distribution Date as provided in this Agreement, including
Section 11(a)(iii), will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) If the Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares or other securities, if applicable)
issuable and deliverable upon the exercise of the Rights are listed or
admitted for trading on any national securities exchange or included for
quotation on any national market system, the Company shall use its best
efforts to cause, from
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<PAGE>
and after such time as the Rights become exercisable, all shares and other
securities reserved for such issuance to be listed or admitted for trading
on such national securities exchange or included for quotation on any such
national market system upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as is
practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event as of which the consideration to be delivered by
the Company upon exercise of the Rights has been determined pursuant to
this Agreement, including in accordance with Section 11(a)(iii), or as soon
as is required by law following the Distribution Date, as the case may be,
a registration statement or statements under the Act, with respect to the
Rights and the securities purchasable upon exercise of the Rights on an
appropriate form or forms, (ii) cause such registration statement or
statements to become effective as soon as practicable after such filing,
and (iii) cause such registration statement or statements to remain
effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities or (B) the Expiration Date. The Company
will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states.
The Company may temporarily suspend, for a period of time not to exceed 90
days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement or statements and permit it or them to become
effective. Upon any such suspension, the Company shall either advise in
writing all shareholders of record as of that date or issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as either advise in writing all shareholders
of record as of that date or issue a public announcement at such time as
the suspension is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualifications in such jurisdiction, if
any, shall have been obtained, the exercise thereof shall not be permitted
under applicable law or a registration statement (if required by law) shall
not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares or other
securities, if applicable) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized
and issued and, with respect to Preferred Shares, Common Shares or other
shares of capital stock, fully paid and non-assessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for Preferred Share Fractions (or
Common Shares or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required (i) to pay any transfer
tax or charge that may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of
a number of Preferred Share Fractions (or Common Shares or other
securities, as the case may be) in respect of a name other than that of the
registered holder of the Rights Certificate evidencing Rights surrendered
for exercise or (ii) to issue or deliver any certificates for a number of
Preferred Share Fractions (or Common Shares or other securities, as the
case may be) in a name other than that of the registered holder upon the
exercise of any Rights until such tax or charge shall have been paid (any
such tax or charge being payable by the
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<PAGE>
holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax or charge
is due.
Section 10. Capital Stock Record Date.
Each Person in whose name any certificate for a number of Preferred
Share Fractions (or Common Shares or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of such Preferred Share Fractions (or
Common Shares or other securities, as the case may be) represented thereby
on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and all applicable transfer taxes or charges) was made;
provided, however, that if the date of such surrender and payment is a date
upon which the applicable transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares (or
other securities, as the case may be), fractional or otherwise, on, and
such certificate shall be dated, the next succeeding Business Day on which
the applicable transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights
Certificate, as such, shall not be entitled to any rights of a shareholder
of the Company with respect to shares (or other securities, as the case may
be) for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions
or to exercise any preemptive rights, and shall not be entitled to receive
any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.
The Purchase Price, the number and kind of shares or other securities
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11:
(a)
(i) In the event the Company shall at any time after the date of
this Agreement (A) declare or pay any dividend on any security of the
Company payable in Preferred Shares, (B) subdivide or split the outstanding
Preferred Shares, (C) combine or consolidate the outstanding Preferred
Shares into a smaller number of shares or effect a reverse stock split of
the outstanding Preferred Shares, or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e), the Purchase Price in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, split, combination, consolidation or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind
of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Company's transfer
books for the Preferred Shares (or other capital stock, as the case may be)
were open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, split, combination,
consolidation or reclassification. If an event occurs that would require
an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii).
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(ii) Subject to Section 24 of this Agreement, in the event:
(A) Any Person shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person, unless the event causing such
Person to become an Acquiring Person is a transaction set forth in Section
13(a), or
(B) the Board shall declare any Person to be an Adverse
Person, upon a determination by at least a majority of the Continuing
Directors, that such Person, alone or together with its Affiliates or
Associates, has, at any time after the Rights Dividend Declaration Date,
become the Beneficial Owner of a substantial amount of Common Shares (which
amount shall in no event be less than 12% of the Common Shares then
outstanding) and a determination by at least a majority of the Continuing
Directors, after reasonable inquiry and investigation, including
consultation with such Persons as such directors shall deem appropriate,
that (1) such Beneficial Ownership by such Person is intended to cause the
Company to repurchase the Common Shares beneficially owned by such Person
or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide such Person or
its Affiliates or Associates with short-term financial gain under
circumstances where at least a majority of the Continuing Directors
determines that the best long-term interests of the Company and its
shareholders would not be served by taking such action or entering into
such transaction or series of transactions at that time or (2) such
Beneficial Ownership is causing or reasonably likely to cause a material
adverse impact (including, but not limited to, impairment of relationships
with customers or impairment of the Company's ability to maintain its
competitive position) on the business or prospects of the Company,
then, promptly following the first occurrence of a Section 11(a)(ii) Event,
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e)) shall thereafter have the right to
receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, (x) such number of Preferred
Share Fractions, or (y) at the election of at least a majority of the
Continuing Directors and in lieu of a number of Preferred Share Fractions
(a "Section 11(a)(ii) Election"), such number of Common Shares, that equals
the result obtained by (xx) multiplying the then current Purchase Price by
the then number of Preferred Share Fractions for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and (yy) dividing that product (which, following such
first occurrence, shall thereafter be referred to as the "Purchase Price"
for each Right for all purposes of this Agreement) by one one-thousandth of
50% of the Current Market Price (determined pursuant to Section 11(d)(ii)
per Preferred Share (or 50% of the current market price (determined
pursuant to Section 11(d)(ii)) per Common Share, as the case may be) on the
date of such first occurrence (such number of shares, the "Adjustment
Shares").
(iii) In the event that the number of Preferred Shares (or
Common Shares, if applicable) that are authorized by the Company's Articles
of Incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of all of the exercisable Rights in accordance with
Section 11(a)(ii), the Company shall: (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess, the "Spread"),
and (B) with respect to each Right, make adequate provision to substitute
for the Adjustment Shares, upon payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase Price, (3) Preferred Shares,
Common Shares and/or other equity securities of the Company (including,
without limitation, shares, or units of shares, of preferred stock which
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based on, among other things, the dividend and liquidation rights of such
preferred shares, have substantially the same economic value as Common
Shares (such shares of preferred stock, "common stock equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of
the foregoing (whichever substituted, the "Substitute Consideration"),
having an aggregate value equal to the Current Value, where such aggregate
value has been determined by at least a majority of the Continuing
Directors based upon the advice of an investment banking firm selected by
at least a majority of the Continuing Directors; provided, however, if the
Company shall not have made adequate provision to deliver substitute
consideration pursuant to clause (B) above within 30 days following the
later of (x) the date of the occurrence of a Section 11(a)(ii) Event and
(y) the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Preferred Shares (or Common Shares, as the
case may be), to the extent available and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If at
least a majority of the Continuing Directors shall determine in good faith
that it is likely that sufficient additional Preferred Shares (or Common
Shares, as the case may be) could be authorized for issuance upon exercise
in full of the Rights, the 30-day period set forth above may be extended to
the extent necessary, but not more than 90 days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval for
the authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that some action need
be taken pursuant to the first and/or second sentences of this Section
11(a)(iii), the Company (xx) shall provide, subject to Section 7(e), that
such action shall apply uniformly to all outstanding Rights, and (yy) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall give notice to the Rights Agent and
either advise in writing all shareholders of record as of that date or
issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a notice to the Rights Agent and
either a written notice to all shareholders of record or a public
announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), (xxx) the value of the Preferred
Shares shall be the Current Market Price (as determined pursuant to Section
11(d)(ii)) per Preferred Share on the Section 11(a)(ii) Trigger Date, (yyy)
the value of the Common Shares (if applicable) shall be the Current Market
Price (as determined pursuant to Section 11(d)(i)) per Common Share on the
Section 11(a)(ii) Trigger Date, and (zzz) the value of any other "common
stock equivalent" shall be deemed to have the same value as a Common Share
on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of any security of the Company
entitling them to subscribe for or purchase (for a period expiring within
45 calendar days after such record date) Preferred Shares (or shares having
the same rights, privileges and preferences as the Preferred Shares
("equivalent preferred shares")) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares)
less than the Current Market Price (as determined pursuant to Section
11(d)(ii)) per Preferred Share on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of Preferred Shares
outstanding on such record date,
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<PAGE>
plus the number of Preferred Shares which the aggregate offering price of
the total number of preferred Shares and/or equivalent preferred shares so
to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of Preferred
Shares outstanding on such record date, plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid by delivery of consideration part or all of which may in a form other
than cash, the value of such consideration shall be as determined in good
faith by at least a majority of the Continuing Directors, whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent and the holders of the Rights.
Preferred Shares owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any such computation. Such
adjustments shall be made successively whenever such a record date is
fixed, and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly dividend out of the earnings or retained earnings of the
Company), assets (other than a regular quarterly dividend referred to above
or a dividend payable in Preferred Shares, but including any dividend
payable in stock other than Preferred Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b)), the Purchase Price
to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price (as
determined pursuant to Section 11(d)(ii) per Preferred Share on such record
date, less the fair market value (as determined in good faith by at least a
majority of the Continuing Directors, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a Preferred Share and the
denominator of which shall be such Current Market Price (as determined
pursuant to Section 11(d)(ii)) per Preferred Share. Such adjustments shall
be made successively whenever such a record date is fixed, and in the event
that such distribution is not so made, the Purchase Price shall be adjusted
to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d)
(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii), the "Current Market
Price" per Common Share on any date shall be deemed to be the average of
the daily closing prices per share of such Common Shares for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made pursuant to
Section 11(a)(iii), the "Current Market Price" per share of Common Shares
on any date shall be deemed to be the average of the daily closing prices
per share of such Common Shares for the 10 consecutive Trading Days
immediately following such date; provided, however, that in the event that
the Current Market Price per share of the Common Shares is determined
during a period following the announcement by the issuer of such Common
Shares of (A) a dividend or distribution on such Common Shares payable in
such Common Shares or securities convertible into such Common
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Shares (other than the Rights), or (B) any subdivision, split, combination
or reclassification of such Common Shares, and prior to the expiration of
the requisite 30 Trading Day or 10 Trading Day period, as set forth above,
after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, split, combination or reclassification, then,
and in each such case, the "Current Market Price" shall be properly
adjusted to take into account ex-dividend trading. The closing price for
each Trading Day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if the Common Shares are not listed
or admitted to trading on any national securities exchange, the last sale
price or, if not so reported, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the Nasdaq System or
such other system then in use, or, if on any such date the Common Shares
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Common Shares selected by the Continuing Directors. If on any such date
no market maker is making a market in the Common Shares, the "Current
Market Price" per share shall mean the fair value per share as determined
in good faith by at least a majority of the Continuing Directors, whose
determination shall be described in a statement filed with the Rights Agent
and shall be conclusive for all purposes. The term "Trading Day" shall mean
a day on which the principal national securities exchange on which the
Common Shares are listed or admitted to trading is open for the transaction
of business or, if the Common Shares are not listed or admitted to trading
on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "Current
Market Price" per Preferred Share shall be determined in the same manner as
set forth above for the Common Shares in Section 11(d)(i) (other than the
last sentence thereof). If the Current Market Price per Preferred Share
cannot be determined in the manner provided above or if the Preferred
Shares are not publicly held or listed or traded in a manner described in
Section 11(d)(i), the "Current Market Price" per Preferred Share shall be
conclusively deemed to be an amount equal to one thousand (1000) (as such
number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the Current Market Price
per Common Share. If neither the Common Shares nor the Preferred Shares are
publicly held or so listed or traded, "Current Market Price" per Preferred
Share shall mean the fair value per share as determined in good faith by at
least a majority of the Continuing Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this Agreement, the
"Current Market Price" of a Preferred Share Fraction shall be equal to the
"Current Market Price" of one Preferred Share divided by one thousand
(1000).
(e) Anything herein to the contrary notwithstanding, except the last
sentence of this Section 11(e), no adjustment in the Purchase Price shall
be required unless such adjustment would require an increase or decrease of
at least 1% in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the nearest cent or to
the nearest ten-thousandths of a Common Share or other share or one-
millionth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment which would be
required by this Section 11, but for the first sentence of this Section
11(e), shall be made no later than the earlier of (i)
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three years from the date of the transaction or event which mandates such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a), the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject
to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Shares contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k)
and (m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Preferred Share
Fractions purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of Preferred Share Fractions (calculated to the nearest one-millionth of a
Preferred Share) obtained by (i) multiplying (A) the number of Preferred
Share Fractions covered by a Right immediately prior to this adjustment, by
(B) the Purchase Price in effect immediately prior to such adjustment of
the Purchase Price, and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company, acting by the decision of at least a majority of the
Continuing Directors, may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of Preferred Share Fractions purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of Preferred Share
Fractions for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one-ten-thousandth of a Preferred Share) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall either advise in writing all shareholders
of record as of that date or make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This
record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be
at least 10 Business Days later than the date of written advice to all
shareholders of record or the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of rights pursuant to
this Section 11(i), the Company shall, as promptly as practicable, cause to
be distributed to holders of record of Rights Certificates on such record
date Rights Certificates evidencing, subject to Section 14, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by
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the Company, new Rights Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the
manner provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Share Fractions issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Preferred Share Fraction and the
number of Preferred Share Fractions which were expressed in the initial
Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated or par value, if any, of the
number of Preferred Share Fractions issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable Preferred Share Fractions at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date the Preferred Share Fractions and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the number of Preferred Share Fractions and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares or securities (fractional or otherwise) upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that in their sole discretion a majority of the Continuing
Directors shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Shares, (ii) issuance wholly
for cash of any Preferred Shares at less than the Current Market Price, or
(iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any Person (other than a
Subsidiary of the Company in a transaction that complies with Section
11(o)), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o)), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in
one transaction, or a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(o)), if (A) at the
time of or immediately after such consolidation,
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merger, sale or transfer there are any rights, warrants or other
instruments or securities outstanding or agreements in effect that would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (B) prior to, simultaneously with or immediately
after such consolidation, merger, sale or transfer, the shareholders of the
Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section
27, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded
by the Rights, unless such action is approved by a majority of the
Continuing Directors.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare or pay any
dividend on the outstanding Common Shares payable in Common Shares, (ii)
subdivide or split the outstanding Common Shares, or (iii) combine or
consolidate the outstanding Common Shares into a smaller number of Common
Shares or effect a reverse stock split of the outstanding Common Shares, or
(iv) issue any shares of its capital stock in a reclassification of the
Common Shares (including any such reclassification in connection with the
consolidation or merger in which the Company is the continuing or surviving
corporation), the number of Rights associated with each Common Share then
outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each Common Share immediately prior to such event by a
fraction, the numerator of which shall be the number of Common Shares
outstanding immediately prior to the occurrence of such event and the
denominator of which shall be the total number of Common Shares outstanding
following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section
13, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Shares and the Common Shares, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder
of a certificate representing Common Shares) in accordance with Section 26.
The Rights Agent shall be fully authorized to rely and be protected in
relying on any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly,
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a
transaction that complies with Section
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11(o)), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger,
(ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o)) shall consolidate with, or
merge with or into, the Company, and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection
with such consolidation or merger, all or part of the outstanding Common
Shares held by existing shareholders of the Company shall be changed into
or exchanged for stock or other securities of any Person or cash or any
other property, or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, or earning power
aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any Person or Persons (other than
the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o)),
then, and in each such case, except as contemplated by Section 13(d),
proper provision shall be made so that: (A) each holder of a Right, except
as otherwise provided herein, shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, such number of validly authorized and
issued, fully paid, non-assessable and freely tradeable Common Shares of
the Principal Party, not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number
of Preferred Share Fractions for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section
11(a)(ii) Event has occurred prior to the first occurrence of a Section 13
Event, multiplying the number of such Preferred Share Fractions for which a
Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior
to such first occurrence), and dividing that product (which, following the
first occurrence of a Section 13 Event, shall be referred to as the
"Purchase Price" for each Right for all purposes of this Agreement) by (2)
50% of the Current Market Price (determined pursuant to Section 11(d)) per
Common Share of such Principal Party on the date of consummation of such
Section 13 Event; (B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement; (C) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 shall apply
only to such Principal Party following the first occurrence of a Section 13
Event; (D) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common
Shares thereafter deliverable upon the exercise of the Rights; and (E) the
provisions of Section 11(a)(ii) shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean (i) in the case of any transaction
described in Section 13(a)(i) or (ii), the Person that is the issuer of any
securities into which Common Shares are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the
other party to such merger or consolidation, and (ii) in the case of any
transaction described in Section 13(a)(iii), the Person that is the party
receiving the greatest portion of the
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assets or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any such case, (A) if the Common
Shares of such Person are not at such time and have not been continuously
over the preceding 12 month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of another
Person the Common Shares of which are and have been so registered,
"Principal Party" shall refer to such other Person; and (B) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of
the Common Shares having the greatest aggregate market value.
(c)
(i) The Company shall not consummate any such transaction
constituting a Section 13 Event unless the Principal Party shall have a
sufficient number of authorized Common Shares which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and
such Principal Party shall have executed and delivered to the Rights Agent
a supplemental agreement providing for the terms set forth in Section 13(a)
and (b) and further providing that, as soon as practicable after the date
of consummation of any transaction constituting a Section 13 Event, the
Principal Party will (A) prepare and file a registration statement under
the Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (1) become effective as
soon as practicable after such filing and (2) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date, and (B) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
that comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(ii) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the
event that a Section 13 Event shall occur at any time after the occurrence
of a Section 11(a)(ii) Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in
Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (i) and (ii) of Section 13(a) if: (i) such transaction is
consummated with a Person or Persons who acquired Common Shares pursuant to
a Permitted Offer (or a wholly owned Subsidiary of any such Person or
Persons); (ii) the price per Common Share offered in such transaction is
not less than the price per Common Share paid to all holders of Common
Shares whose shares were purchased pursuant to such Permitted Offer, and
(iii) the form of consideration offered in such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.
Section 14 Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p), or to
distribute Rights Certificates that evidence fractional Rights. The Company
may, in lieu of such fractional Rights, pay to the
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registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole Right
shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the
Rights are not listed or admitted to trading on any national securities
exchange, the last sale price or, if not so reported, the average of the
high bid and low asked prices in the over-the-counter market, as reported
by the Nasdaq System or such other system then in use or, if on any such
date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by at least a majority of the
Continuing Directors. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date shall be as
determined in good faith by at least a majority of the Continuing
Directors, whose determination shall be described in a statement filed with
the Rights Agent and shall be conclusive for all purposes.
(b) The Company shall not be required to issue fractions of Preferred
Shares upon exercise of the Rights or to distribute certificates that
evidence fractional Preferred Shares, except in each case for fractions
which are integral multiples of Preferred Share Fractions. The Company may,
in lieu of fractional Preferred Shares which are not integral multiples of
Preferred Share Fractions, pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of
one Preferred Share. For purposes of this Section 14(b), the current market
value of a Preferred Share shall be as determined pursuant to Section
11(d)(ii) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of a Triggering Event and at or after a
Section 11(a)(ii) Election or Section 24(a) Election, the Company shall not
be required to issue fractions of Common Shares upon exercise of the Rights
or to distribute certificates that evidence fractional Common Shares. The
Company may, in lieu of fractional Common Shares, pay to the registered
holders of Rights Certificates at the time such Rights are exercised as
herein provided an amount in cash equal to the same fraction of the current
market value of one Common Share. For purposes of this Section 14(c), the
current market value of one Common Share shall be as determined pursuant to
Section 11(d)(i) for the Trading Day immediately prior to the date of such
exercise.
(d) In the event the Company determines it advisable to issue
fractions of Rights, fractions of Preferred Shares for fractions which are
not integral multiples of Preferred Share Fractions or fractions of Common
Shares as permitted in this Agreement, the Company shall immediately so
notify the Rights Agent, and in no event later than five Business Days
prior to the date such fractions are to be issued. The Company and the
Rights Agent shall then adopt mutually agreeable procedures with respect to
any such issuance. In the event the Company and the Rights Agent are unable
to agree upon such procedures, the Rights Agent may resign and be
discharged from its duties under this Agreement or the Company may remove
the Rights Agent, both as set forth in Section 21; provided, however, that
only one day's prior written notice need be given of such resignation or
removal.
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(e) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights, or any fractions of
Preferred Shares for fraction which are not integral multiples of a
Preferred Share Fraction, or any fractional Common Shares (if applicable)
upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the associated Common Share
certificates). Any registered holder of any Rights Certificate (or, prior
to the Distribution Date, the associated Common Share certificate), without
the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, the associated Common
Share certificate), may, in his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right
to exercise the Rights in the manner provided in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights,
it is specifically acknowledged that the holders of Rights would not have
an adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
Every holder of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other holder of a Right
that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Shares;
(b) on or after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or offices of the Rights Agent designated for such purposes,
duly endorsed or accompanied by a proper instrument of transfer and with
the appropriate forms and certificates duly completed and fully executed
and otherwise complying with any other requirements set forth in this
Agreement;
(c) subject to Section 6(a) and Section 7(f), the Company and the
Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Share certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificate or the associated Common Share
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e), shall be required to be
affected by any notice or knowledge to the contrary; and
(d) Notwithstanding anything in this Agreement or the Rights to the
contrary, the Company, the Board and the Rights Agent shall not have any
liability to any holder of a Right or other Person as a result of the
inability of the Company or the Rights Agent to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental,
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regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such
obligation.
Section 17. Rights Certificate Holder Not Deemed a Shareholder.
No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the
number of Preferred Share Fractions or any other securities of the Company
(including the Common Shares) which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder
of any Rights Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting shareholders (except as provided in Section 25),
or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and disbursements and other disbursements incurred in the acceptance,
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability
or expense incurred without negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights
Agent in connection with the administration and execution of this Agreement
and the exercise and performance of its duties hereunder, including without
limitation the costs and expenses of defending against and appealing any
such claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided, however, that such
Person would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21. In case at the time such successor Rights
Agent shall
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succeed to the agency created by this Agreement, any of the Rights Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of a predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Rights Certificates (or, prior to the Distribution Date, the
associated Common Share certificates), by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the advice of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
advice.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including without limitation, the identity of any Acquiring Person or Adverse
Person and the determination of "Current Market Price") be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chief Executive Officer, the Chief Financial Officer,
any Vice President, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and any such certificate shall be full and
complete authorization and protection to the Rights Agent for any action taken,
suffered or omitted in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent shall not be liable or responsible hereunder except
for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
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(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after receipt of a certificate delivered pursuant to Section
12 describing any such adjustment); nor shall it be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any Preferred Shares or Common Shares will,
when so issued, be validly authorized and issued, fully paid and non-assessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions or direction with respect to the administration of this Agreement
and the exercise and performance of its duties hereunder from the Chief
Executive Officer, the Chief Financial Officer, any Vice President, the
Secretary or any Assistant Secretary of the Company, and to apply to such
officers for advice, instructions or direction in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions or direction of any such officer.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent or any shareholder,
director, officer or employee of the Rights Agent from acting in any other
capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be liable or responsible
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss or damages to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights or
powers if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
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(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to exercise, as the case may be, has either not
been duly completed and executed or indicates an affirmative response to clause
1 and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer until it has received
instructions with respect thereto from the Company.
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon 30 days' notice in writing mailed to
the Company, and to each transfer agent of the Common Shares and the Preferred
Shares the existence of which the Rights Agent has received notice from the
Company, by registered or certified mail, and to the registered holders of the
Rights Certificates (or, prior to the Distribution Date, the associated Common
Share certificates) by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares and the Preferred Shares, by registered or certified
mail, and to the registered holders of the Rights Certificates (or, prior to the
Distribution Date, the associated Common Share certificates) by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the registered holder of a Rights Certificate (or, prior to the Distribution
Date, the associated Common Share certificate) who shall, with such notice,
submit his Rights Certificate (or, prior to the Distribution Date, the
associated Common Share certificate) for inspection by the Company, then the
registered holder may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States, the State of Minnesota or the
State of New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of Minnesota or the State of New York) in good standing, having an office in the
State of Minnesota or the State of New York, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $5 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for such purpose. Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and the
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Rights Certificates (or, prior to the Distribution Date, the associated
Common Share certificates). Failure to give any notice provided for in this
Section 21 or to appoint a successor Rights Agent, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.
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Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, but subject to Section 7(e), the Company may, at its option, issue
new Rights Certificates evidencing Rights in such form as may be specified by at
least a majority of the Continuing Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the Expiration Date, the Company (a) shall, with respect to Common
Shares so issued or sold pursuant to the exercise of stock options, grants or
awards outstanding as of the Distribution Date under any benefit plan or
arrangement for employees or directors, or upon the exercise, conversion or
exchange of securities issued by the Company prior to the Distribution Date, and
(b) may, in any other case, if deemed necessary or appropriate by at least a
majority of the Continuing Directors, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance could
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of issuance thereof.
Section 23. Redemption and Termination.
(a) The Board, acting by at least a majority of the Continuing Directors,
may, at its option, at any time prior to the first to occur of the close of
business on (i) the tenth Business Day following the Stock Acquisition Date (or,
if the Stock Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth Business Day following the Record Date), (ii) the
tenth Business Day after a determination, pursuant to Section 11(a)(ii)(B), that
a Person is an Adverse Person, or (iii) the Final Expiration Date, redeem all
but not less than all of the then outstanding Rights at a redemption price of
$.001 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price") and the Company may, at its option, pay the Redemption Price in
Preferred Shares (based on the "Current Market Price," as defined in Section
11(d)(ii) of the Preferred Shares at the time of redemption), Common Shares
(based on the "Current Market Price," as defined in Section 11(d)(i) of the
Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board, acting by a majority of the
Continuing Directors. Notwithstanding anything contained in this Agreement to
the contrary, the Rights shall not be exercisable after the first occurrence of
a Section 11(a)(ii) Event until such time as the Company's right of redemption
hereunder has expired. The Company shall promptly notify the Rights Agent
following the action of the Board ordering redemption of the Rights.
(b) Immediately upon the action of the Board ordering the redemption of the
Rights pursuant to this Section 23, and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the registered holders of the then outstanding Rights by
mailing such notice to
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all such holders at each holder's last address as it appears upon the registry
books of the Rights Agent for the Common Shares; provided, however, the failure
to give or any defect in any such notice shall not affect the validity of such
redemption. Any notice which is mailed in the manner provided in Section 26
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.
Section 24. Exchange.
(a) The Board, acting by at least a majority of the Continuing Directors,
may, at its option, at any time after a Section 11(a)(ii) Event, exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e)) for
Preferred Share Fractions (or, at the election of at least a majority of the
Continuing Directors (a "Section 24(a) Election"), Common Shares) at an exchange
ratio of one Preferred Share Fraction (or Common Share, as the case may be) per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board ordering the exchange of any
Rights pursuant to Section 24(a) and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of
Preferred Share Fractions (or Common Shares, as the case may be) equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly notify the Rights Agent and give public notice of any
such exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner provided in Section 26 shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of Preferred Share
Fractions (or Common Shares, as the case may be) for Rights will be effected
and, in the event of any partial exchange, shall be effected pro rata based on
the number of Rights (other than Rights which have become void pursuant to the
provision of Section 7(e)) held by each holder of Rights.
(c) In the event that there shall not be sufficient Preferred Shares (or
Common Shares, if applicable) issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be necessary to
authorize additional Preferred Shares (or Common Shares, as the case may be) for
issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of Common Shares
or Preferred Shares or to distribute certificates which evidence fractional
Common Shares or Preferred Shares, except in each case for fractions of
Preferred Shares which are integral multiples of Preferred Share Fractions. In
lieu of such fractional Preferred Shares which are not integral multiples of
Preferred Share Fractions, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Preferred Shares would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Preferred Share, as determined pursuant to the
second sentence of Section 11(d)(ii), for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
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(e) If applicable, the Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this Section 24(e), the current market value of a whole Common Share
shall be as determined pursuant to Section 11(d)(i) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Shares or to make any other distribution to the holders of Preferred
Shares (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), (ii) to offer to the holders of Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of the Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in one
transaction or a series of related transactions, of more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)), or (v)
to effect the liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each registered holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26, a notice
of such proposed action, which shall specify the record date for the purposes of
such stock dividend or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of Preferred Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by Section 25(a)(i)
or (ii) at least ten Business Days prior to the record date for determining
holders of Preferred Shares for purposes of such action, and in the case of any
such other action, at least ten Business Days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of
Preferred Shares, whichever shall be the earlier.
(b) In case any Triggering Events shall occur, then, in any such case, (i)
the Company shall as soon as practicable thereafter give to each registered
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26, a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under Section
11(a)(ii) or Section 13, and (ii) in the event of an appropriate Section
11(a)(ii) Election or Section 24(a) Election, all references, in Section 25(a)
shall be deemed thereafter to refer to Common Shares and/or, if appropriate,
other securities.
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<PAGE>
Section 26. Notices.
(a) Notices, communications or demands authorized by this Agreement to
be given or made by the Rights Agent or by the registered holder of any
Rights Certificate (or, prior to the Distribution Date, the associated
Common Share certificate) to or on the Company shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Rights Agent) as follows:
Optical Sensors Incorporated
7615 Golden Triangle Drive
Eden Prairie, MN 55344
Attention: Chief Executive Officer
with a copy to:
Oppenheimer Wolff & Donnelly
Plaza VII, Suite 3400
45 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Thomas A. Letscher
(b) Subject to the provisions of Section 21, notices, communications
or demands authorized by this Agreement to be given or made by the Company
or by the holder of any Rights Certificate (or, prior to the Distribution
Date, the associated Common Share certificate) to or on the Rights Agent
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the
Company) as follows:
Norwest Bank Minnesota, N.A.
161 North Concord Exchange
South St. Paul, Minnesota 55075-0738
Attention: Stock Transfer Department
(c) Notices, communications or demands authorized by this Agreement to
be given or made by the Company or the Rights Agent to the registered
holder of any Rights Certificate (or, prior to the Distribution Date, the
associated Common Share certificate) shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed to such holder at the
address of such holder as shown on the registry books of the Company
maintained by the Company, the Rights Agent or the transfer agent for the
Common Shares, as appropriate.
-33-
<PAGE>
Section 27. Supplements and Amendments.
Prior to the Distribution Date and subject to the penultimate sentence
of this Section 27, the Company may (acting by at least a majority of the
Continuing Directors), and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement, including
without limitation to modify or amend the definition of Acquiring Person
set forth in Section 1(a) hereof and to change the Purchase Price set forth
in Section 4(a) and Section 7(b) hereof, without the approval of any
holders of certificates representing Common Shares and without the approval
of any holders of Rights or holders of certificates representing Rights.
From and after the Distribution Date and subject to the penultimate
sentence of this Section 27, the Company may (acting by at least a majority
of the Continuing Directors), and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order (a) to cure any ambiguity herein,
(b) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provision herein, (c) to otherwise
shorten or lengthen any time period hereunder, or (d) to change or
supplement the provisions hereunder in any manner which the Company may
deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such Person);
provided, however, that this Agreement may not be supplemented or amended
to lengthen (i) a time period relating to when the rights may be redeemed
at such time as the Rights are not then redeemable, or (ii) any other time
period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the holders of Rights
(other than an Acquiring Person, an Adverse Person or an Affiliate or
Associate of any such Person). Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price,
the Final Expiration Date or the number of Preferred Share Fractions for
which a Right is exercisable. Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of
the holders of Common Shares.
Section 28. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board.
For all purposes of this Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3d(d)(1)(i) of the General Rules and
Regulations under the Exchange Act, whether or not the Common Shares are
registered under the Exchange Act. The Board (where specifically provided
for herein, acting by at least a majority of the Continuing Directors)
shall have the exclusive power and authority to administer this Agreement
and to exercise all rights and powers specifically granted to the Board
(where specifically provided for herein, acting by at least a majority of
the Continuing Directors) or to
-34-
<PAGE>
the Company (where specifically provided for herein, acting by at least a
majority of the Continuing Directors), or as may be necessary or advisable
in the administration of this Agreement, including, without limitation, the
right and power to (a) interpret the provisions of this Agreement, and (b)
make all calculations and determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem
or not redeem the Rights or to amend or supplement this Agreement). All
such actions, calculations, interpretations and determinations (including
for purposes of clause (ii) below, all omissions with respect to the
foregoing) which are done or made by the Board (where specifically provided
for herein, acting by at least a majority of the Continuing Directors) in
good faith shall (i) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (ii) not
subject the Board or any director to any liability to the holders of the
Rights.
Section 30. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, the associated
Common Share certificates) any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Shares).
Section 31. Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable for any purpose or under any set of circumstances or
as applied to any Person, such invalid, void or unenforceable term,
provision, covenant or restriction shall continue in effect to the maximum
extent possible for all other purposes, under all other circumstances and
as applied to all other Persons, and the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated; provided, however, that notwithstanding anything in this
Agreement or the Rights to the contrary, if any such term, provision,
covenant or restriction is held by such court or authority to be invalid,
void or unenforceable and at least a majority of the Continuing Directors
determines in its good faith judgment that severing the invalid language
from this Agreement would adversely affect the purpose of effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth
Business Day following the date of such determination by such Continuing
Directors. Without limiting the foregoing, if any provisions requiring that
a determination be made by less than the entire Board (or at a time or with
the concurrence of a group of directors consisting of less than the entire
Board) is held by a court of competent jurisdiction or other authority to
be invalid, void or unenforceable, such determination shall then be made by
the Board in accordance with applicable law and the Company's Articles of
Incorporation and Bylaws.
Section 32. Governing Law.
This Agreement, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall
-35-
<PAGE>
be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such
State.
Section 33. Counterparts.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
Section 34. Descriptive Headings.
Descriptive headings of the Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: OPTICAL SENSORS INCORPORATED
By: /s/ Wesley G. Peterson By: /s/ Sam B. Humphries
-------------------------------- ----------------------------------
Name: Wesley G. Peterson Name: Sam B. Humphries
Title: Chief Financial Officer and Title: Chief Executive Officer
Secretary
Attest NORWEST BANK MINNESOTA, N.A.
By: /s/ Nancy J. Resengren By: /s/ Barbara M. Novak
-------------------------------- ----------------------------------
Name: Nancy J. Resengren Name: Barbara M. Novak
Title: Assistant Secretary Title: Assistant Vice President
-36-
<PAGE>
Exhibit A
---------
FORM
of
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
of
SERIES A JUNIOR PREFERRED STOCK
of
OPTICAL SENSORS INCORPORATED
Pursuant to Section 151 of the
Delaware General Corporation Law of the State of Delaware
-----------------
We, Sam B. Humphries, Chief Executive Officer, and Wesley G. Peterson,
Chief Financial Officer, of Optical Sensors Incorporated, a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions thereof, DO
HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors by the
Certificate of Incorporation of the Corporation, the said Board of Directors on
December 3, 1996, adopted the following resolution creating a series of two
hundred fifty thousand (250,000) shares of Preferred Stock designated as Series
A Junior Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the voting powers,
preferences and relative, participation, optional and other special rights of
the shares of such series, and the qualifications, limitation or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as Series A Junior Preferred Stock, par value $.01 per share (the
"Series A Junior Preferred Share(s)"), and the number of shares constituting
such series shall be two hundred fifty thousand (250,000).
<PAGE>
Section 2. Dividends and Distributions.
----------------------------
(a) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to Series A Junior
Preferred Shares with respect to dividends, the holders of Series A Junior
Preferred Shares shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of January, March, July and October
in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date," commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a Series A Junior Preferred Share, in
an amount per share (rounded to the nearest cent) equal to (subject to the
provision for adjustment hereinafter set forth), 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $.01 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a Series A Junior Preferred Share. In the
event the Corporation shall at any time after December 3, 1996 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of Series A Junior Preferred Shares were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series
A Junior Preferred Shares as provided in paragraph (a) above immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue and be cumulative on outstanding
Series A Junior Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issue of such Series A Junior Preferred Shares, unless the
date of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Junior Preferred Shares entitled to receive
a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the Series A Junior Preferred Shares in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of Series A Junior Preferred Shares entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. In addition to any other voting rights required
--------------
by law, the holders of Series A Junior Preferred Shares shall have the following
voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
Series A Junior Preferred Share shall entitle the holder thereof to 1,000 votes
on all matters submitted to a vote of the
2
<PAGE>
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, then in each such case the number of votes per share
to which holders of Series A Junior Preferred Shares were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) If, on the date used to determine stockholders of record for any
meeting of stockholders for the election of directors, a default in dividends on
the Series A Junior Preferred Shares shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be increased by
two, and the holders of the Series A Junior Preferred Shares shall have the
right at such meeting, voting together as a single class, to elect two directors
of the Corporation to fill such newly created directorships. Each director
elected by the holders of Series A Junior Preferred Shares (herein called a
"Series A Preferred Director") shall continue to serve as such director for the
full term for which he shall have been elected, notwithstanding that prior to
the end of such term a default in dividends shall cease to exist. Any Series A
Preferred Director may be removed by, and shall not be removed except by, the
vote of the holders of record of the outstanding Series A Junior Preferred
Shares, voting together as a single class, at a meeting of the stockholders, or
of the holders of Series A Junior Preferred Shares called for such purpose.
Thereafter, so long as a default in dividends on the Series A Preferred Shares
shall exist (i) any vacancy in the office of a Series A Preferred Director may
be filled (except as provided in the following clause (ii)) by an instrument in
writing signed by the remaining Series A Preferred Director and filed with the
Corporation and (ii) in the case of the removal of any Series A Preferred
Director, the vacancy may be filled by the vote of the holders of the
outstanding Series A Junior Preferred Shares, voting together as a class, at the
same meeting at which such removal shall be voted. Each director appointed as
aforesaid by the remaining Series A Preferred Director shall be deemed, for all
purposes hereof, to be a Series A Preferred Director. Whenever the term of
office of the Series A Preferred Directors shall end and no default in dividends
on the Series A Junior Preferred Shares shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes of this Section 3(b), a "default in dividends" on the Series A
Junior Preferred Shares shall be deemed to have occurred whenever there shall be
an arrearage in the payment of any dividends to which the holders of the Series
A Junior Preferred Shares are entitled to receive, whether or not any such
dividends have been declared by the Board of Directors, for six consecutive
quarters, and, having so occurred, such default shall be deemed to exist
thereafter until, but only until, all accrued dividends on all shares of Series
A Junior Preferred Shares then outstanding shall have been paid through the last
Quarterly Dividend Payment Date.
At any time when such right to elect directors separately as a class
shall have so vested, the Corporation may, and upon the written request of the
holders of record of not less than 20% of the then outstanding total number of
the Series A Junior Preferred Shares shall, call a special meeting of holders of
such Series A Junior Preferred Shares for the election of directors. In the case
of such a written request, such special meeting shall be held within 90 days
after the delivery of such request, and, in either case, at the place and upon
the notice provided by law and in the Bylaws of the Corporation; provided that
the Corporation shall not be required to call such a special meeting if such
request is received less than 120 days before the date fixed for the next
ensuing annual or special meeting of stockholders of the Corporation. After the
number of directors of the Corporation shall have been increased by two as
hereinabove provided, the number as so increased may thereafter be further
increased or decreased in such manner as may be permitted by the Certificate of
Incorporation or By-
3
<PAGE>
laws, provided that no such action shall impair the right of the holders of
Series A Junior Preferred Shares to elect and to be represented by two directors
as herein provided.
(c) Except as otherwise provided herein, in the Certificate of
Incorporation of the Corporation or by law, the holders of Series A Junior
Preferred Shares and the holders of Common Stock (and the holders of shares of
any other series or class entitled to vote thereon) shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
Section 4. Certain Restrictions.
---------------------
(a) Whenever any dividends or other distributions payable on the Series A
Junior Preferred shares as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on Series A Junior Preferred Shares outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any share
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Preferred Shares;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Preferred
Shares, except dividends paid ratably on the Series A Junior Preferred
Shares and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Preferred
Shares, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Preferred
Shares; or
(iv) purchase or otherwise acquire for consideration any Series A
Junior Preferred Shares, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any Series A Junior Preferred Shares
------------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors.
4
<PAGE>
Section 6. Liquidation, Dissolution or Winding Up. In the event of any
---------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series A Junior Preferred Shares shall be entitled
to receive the greater of (a) $1,000.00 per share, plus accrued dividends to the
date of distribution, whether or not earned or declared, or (b) an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
Common Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the amount to which holders of Series A Junior Preferred
Shares were entitled immediately prior to such event pursuant to clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, Etc. In case the Corporation shall
---------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the Series A
Junior Preferred Shares shall at the same time be similarly exchanged or changed
in an amount per share (subject to the provision for adjustment hereinafter set
forth) equal to 1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange or change of
Series A Junior Preferred Shares shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The Series A Junior Preferred Shares shall not
--------------
be redeemable.
Section 9. Ranking. The Series A Junior Preferred Stock shall rank junior
--------
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 10. Fractional Shares. Series A Junior Preferred Shares may be
------------------
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Preferred Shares.
Section 11. Amendment. The Certificate of Incorporation of the
----------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Preferred Shares so as to affect them adversely without the affirmative vote of
the holders of a majority or more of the outstanding Series A Junior Preferred
Shares, voting separately as a class.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and subscribed this
Certificate and do affirm the foregoing as true under penalties of perjury this
3rd day of December, 1996.
-------------------------------
Sam B. Humphries
Chief Executive Officer
ATTEST:
- -----------------------------
Wesley G. Peterson
Chief Financial Officer
6
<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER DECEMBER 2, 2006 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT REFERRED TO HEREIN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE PERSON OR AN AFFILIATE
OR ASSOCIATE OF AN ACQUIRING PERSON OR AN ADVERSE PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN [ACQUIRING] [ADVERSE]
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN [ACQUIRING] [ADVERSE] PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.] THE RIGHTS SHALL
NOT BE EXERCISABLE AND SHALL BE VOID SO LONG AS HELD BY A HOLDER IN ANY
JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER,
OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT
HAVE BEEN OBTAINED OR BE OBTAINABLE.*
- -------------------------------------------------------------------------------
*The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person, as
applicable, and shall replace the preceding sentence.
1
<PAGE>
OPTICAL SENSORS INCORPORATED
----------------------------
RIGHTS CERTIFICATE
------------------
This certifies that ______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of December 3, 1996 (the "Rights Agreement"), between
Optical Sensors Incorporated, a Delaware corporation (the "Company"), and
Norwest Bank Minnesota, N.A., a national banking association (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 p.m.
(Minneapolis, Minnesota time) on December 2, 2006 at the office of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one one-
thousandth of one fully paid and non-assessable share of the Company's Series A
Junior Preferred Stock, par value $.01 per share (the "Preferred Shares"), at a
purchase price (the "Purchase Price") of $90.00 per one one-thousandth of a
Preferred Share (such fraction, a "Preferred Share Fraction") upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly completed and executed. The Purchase Price may be
paid by cash, certified bank check or money order payable to the order of the
Company. The number of Rights evidenced by this Rights Certificate (and the
number of Preferred Share Fractions which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Preferred Share Fraction
set forth above, are the number and Purchase Price as of the close of business
on January 8, 1997, based on the Preferred Shares as constituted at such date.
Pursuant to the Rights Agreement, the Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole Preferred Shares will be
issued.
Capitalized terms used herein without definition shall have the meaning
given to them in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced
by this Rights Certificate are beneficially owned by (i) an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person, (ii) a
transferee of any such Acquiring Person, Adverse Person, Associate or Affiliate,
or (iii) under certain circumstances specified in the Rights Agreement, a
transferee of a Person who, after such transfer, became an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person, such Rights
shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of Preferred Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events. In certain circumstances and as described in the Rights
Agreement, Common Shares, cash, property or other securities may be issued by
the Company upon the exercise hereof in lieu of Preferred Shares.
2
<PAGE>
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal offices of the
Company and the above-mentioned office of the Rights Agent and are also
available upon written request to the Company.
Subject to the provisions of the Rights Agreement, this Rights Certificate,
with or without other Rights Certificates, upon surrender at the office or
offices of the Rights Agent designated for such purpose, with the Form of
Election and Certificate set forth on the reverse side duly executed, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of Preferred Shares Fractions as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed, subject to the approval of at least a majority
of the Continuing Directors, at a redemption price of $.001 per Right at any
time prior to the earlier of the close of business on (i) the tenth Business Day
following the Stock Acquisition Date (as such time period may be extended
pursuant to the Rights Agreement), (ii) the tenth Business Day after a
determination that a Person is an Adverse Person, or (iii) the Final Expiration
Date.
Subject to the provisions of the Rights Agreement, the Company may, at its
option, at any time after a Section 11(a)(ii) Event, subject to the approval of
at least a majority of the Continuing Directors, exchange all or part of the
Rights evidenced by this Certificate for Preferred Share Fractions, or, upon an
appropriate Section 24(a) election, Common Shares.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of a Preferred Share Fraction), but in lieu thereof a cash payment
will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Preferred Shares or
of any other securities of the Company (including Common Shares) which may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive
3
<PAGE>
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated:_______________________
ATTEST:___________________________ OPTICAL SENSORS INCORPORATED
__________________________________ By:_______________________________
Title:____________________________
Countersigned:
NORWEST BANK MINNESOTA, N.A.
By:_______________________________
Authorized Officer
4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers
unto
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated:___________________________ ___________________________________________
Signature
Signature Guaranteed:
The signature(s) should be guaranteed by a brokerage firm or a financial
institution that is a member of an approved medallion program, such as
Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchange Medallion
Program ("SEMP") or New York Stock Exchange, Inc. Medallion Signature Program
("MSP").
5
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined pursuant to the Rights Agreement);
and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became
an Acquiring Person, an Adverse Person or an Affiliate or Associate of
any such Person.
Date:___________________________ __________________________________________
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
6
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: Optical Sensors Incorporated
The undersigned irrevocably hereby elects to exercise ___________ Rights
represented by this Rights Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or Common Shares or such other securities of
the Company or of any other person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be issued in the name
of and delivered to:
Please insert social security
or other identifying number --------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number --------------------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
Dated: -----------------------------------------
----------------------- Signature
Signature Guaranteed:
The signature(s) should be guaranteed by a brokerage firm or a financial
institution that is a member of an approved medallion program, such as
Securities Transfer Agents Medallion Program ("STAMP"), Stock Exchange Medallion
Program ("SEMP") or New York Stock Exchange, Inc. Medallion Signature Program
("MSP").
7
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such
Person (as such terms are defined pursuant to the Rights Agreement);
and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring
Person, an Adverse Person or an Affiliate or Associate of any such
Person.
Date: -----------------------------------------
---------------------------- Signature
Signature Guaranteed:
NOTICES
-------
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
8
<PAGE>
Exhibit C
---------
OPTICAL SENSORS INCORPORATED
SUMMARY OF RIGHTS AGREEMENT
---------------------------
On December 3, 1996, the Board of Directors of Optical Sensors Incorporated
(the "Company") declared a dividend distribution of one preferred share purchase
right (a "Right") for each outstanding share of the Company's Common Stock, par
value $.01 per share (the "Common Shares"), payable to shareholders of record at
the close of business on January 8, 1997 (the "Record Date"). Each Right
entitles the registered holder to purchase from the Company at any time
following the Distribution Date (as defined below) one one-thousandth of a share
(a "Preferred Share Fraction") of the Company's Series A Junior Preferred Stock,
par value $.01 per share (the "Preferred Shares"), or a combination of
securities and assets of equivalent value, at a purchase price of $90.00 per
Preferred Share Fraction (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") dated as of December 3, 1996 between the Company and Norwest
Bank Minnesota, N.A., as Rights Agent.
Initially, the Rights will be evidenced, with respect to any of the Common
Share certificates outstanding as of the Record Date, by such Common Share
certificates, and no separate Rights Certificates will be distributed. The
Rights will separate from the Common Shares and will be distributed to the
holders thereof on the "Distribution Date," which shall be the first to occur of
the following: (i) the close of business on the tenth business day following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Shares, other than
as a result of a Permitted Offer, as defined (the "Stock Acquisition Date");
(ii) the close of business on the tenth business day (or such later date as the
Board of Directors, acting by a majority of the Continuing Directors, may
determine) following the commencement of a tender offer or exchange offer (other
than a Permitted Offer, as defined) that would result in a person or group
beneficially owning 15% or more of the outstanding Common Shares; or (iii) the
close of business on the tenth business day after a determination by at least a
majority of the Continuing Directors that a Person is an Adverse Person, and
that such Person, alone or together with its affiliates and associates, has
become the beneficial owner of a substantial amount of Common Shares (which
amount shall in no event be less than 12% of the Common Shares then outstanding)
and (a) such beneficial ownership by such Person is intended to cause the
Company to repurchase the Common Shares beneficially owned by such Person or to
cause pressure on the Company to take action or enter into a transaction or
series of transactions intended to provide such Person with short-term financial
gain under circumstances where at least a majority of the Continuing Directors
determines that the best long-term interests of the Company and its shareholders
would not be served by taking such action or entering into such transaction or
series of transactions at that time or (b) such
1
<PAGE>
beneficial ownership is causing or reasonably likely to cause a material adverse
impact (including, but not limited to, impairment of relationships with
customers or impairment of the Company's ability to maintain its competitive
position).
A "Permitted Offer" means a tender or exchange offer which is for all
outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a majority
of the members of the Board who are Continuing Directors, who are not officers
of the Company and who are not Acquiring Persons or Affiliates, Associates,
nominees or representatives of an Acquiring Person, to be adequate and otherwise
in the best interests of the Company and its shareholders (other than the Person
or any Affiliate or Associate thereof on whose behalf the offer is being made).
A "Continuing Director" is (i) any person who is a member of the Board of
Directors prior to December 3, 1996, while such person is a member of the Board
of Directors, who is not an Acquiring Person or an Adverse Person, or an
affiliate or associate of either of the foregoing, or a representative or
designee of an Acquiring Person or an Adverse Person or any such affiliate or
associate, or (ii) any person who subsequently becomes a member of the Board of
Directors who is not an Acquiring Person or an Adverse Person, or an affiliate
or associate of either of the foregoing, or a representative or designee of an
Acquiring Person, an Adverse Person or any such affiliate or associate, and
whose nomination or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors.
Until the Distribution Date, (i) the Rights will be evidenced by Common
Share certificates and will be transferred with and only with such Common Share
certificates, (ii) new Common Share certificates issued after January 8, 1997
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificate for Common Shares
outstanding will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 2, 2006, unless earlier redeemed or
exchanged by the Company as described below (the earliest of all such dates, the
"Expiration Date").
As soon as practical after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Shares as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. All Common Shares issued prior to the earlier of the
Distribution Date and the Expiration Date will be issued with Rights. Common
Shares issued after the Distribution Date upon the exercise of employee stock
options, issuances under other employee stock benefit plans or the conversion of
convertible securities issued prior to the Distribution Date will be issued with
Rights.
In the event (i) that a person or group, with certain exceptions, becomes
the beneficial owner of more than 15% of the then outstanding Common Shares,
other than as a result of a Permitted Offer or (ii) at least a majority of the
Continuing Directors determines that a person is an Adverse Person, then each
holder of a Right will thereafter have the right to receive, upon
2
<PAGE>
exercise, that number of Preferred Share Fractions (or in certain circumstances
that number of Common Shares, cash, property or other securities of the Company)
having a market value equal to two times the Exercise Price of the Right. The
Rights, however, are not exercisable following the occurrence of either of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below. Notwithstanding any of the foregoing, following
the occurrence of either of the events set forth above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or Adverse Person (or certain related
persons and transferees) will be null and void. The events set forth in this
paragraph are referred to as "Section 11(a)(ii) Events."
In the event that, at any time following the Stock Acquisition Date, other
than pursuant to a Permitted Offer, (i) the Company is acquired in a merger or
other business combination transaction in which the Company is not the surviving
corporation or the Common Shares are changed or exchanged or (ii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive that number of shares of common stock of
the acquiring company which equals the exercise price of the Right divided by
one-half of the current market price of such common stock at the date of the
occurrence of the event. The events set forth in this paragraph are referred to
as "Section 13 Events," and the Section 11(a)(ii) Events and the Section 13
Events are collectively referred to as the "Triggering Events."
At any time after the occurrence of a Section 11(a)(ii) Event, at the
election of a majority of the Continuing Directors, the Company may exchange the
Rights (other than Rights which have become void), in whole or in part, at an
exchange ratio of one Preferred Share Fraction per Right (subject to
adjustment).
The Purchase Price payable and the number of Preferred Share Fractions
issuable upon exercise of the Rights are subject to adjustment from time to time
to prevent dilution (i) in the event of a stock dividend on, or a subdivision,
split, combination, consolidation or reclassification of, the Preferred Shares,
(ii) if all holders of any security of the Company are granted rights, options
or warrants to subscribe for or purchase Preferred Shares or convertible
securities at less than the current market price of the Preferred Shares, or
(iii) upon the distribution to holders of Preferred Shares of evidences of
indebtedness or assets (excluding quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company will not be required to issue fractional Preferred Shares
other than fractions which are integral multiples of Preferred Share Fractions
(or, in the event of an appropriate election, Common Shares), and, in lieu of
such fractional Common Shares), and, in lieu of such fractional Preferred Shares
(or Common Shares, as the case may be) an adjustment in cash will be made based
on the market price of the Preferred Shares (or Common Shares, if appropriate)
on the last trading date prior to the date of exercise.
3
<PAGE>
In general, at any time prior to the first to occur of (i) ten days
following the Stock Acquisition Date, (ii) ten days after a person is determined
to be an Adverse Person, or (iii) the Final Expiration Date, the Company, acting
by a majority of the Continuing Directors, may redeem the Rights in whole, but
not in part, at a price of $.001 per Right (payable in cash, stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
redemption of the Rights, the Rights will terminate and the only right of the
holders of the Rights will be to receive the $.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or receive dividends. The creation of the Rights should not be taxable
to shareholders. Shareholders may, however, depending upon the circumstances,
recognize taxable income in the event that the Rights become exercisable for
Preferred Shares (or other consideration) of the Company or for common stock of
an acquiring company as set forth above.
Any of the provisions of the Rights Agreement, including the definition of
Acquiring Person or the Purchase Price, may be amended by at least a majority of
the Continuing Directors prior to the Distribution Date. After the Distribution
Date, the provisions of the Rights Agreement may be amended by at least a
majority of the Continuing Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or Adverse Person), or to
shorten or lengthen certain time periods under the Rights Agreement. However, no
amendment to adjust the time period governing redemption can be made at such
time as the Rights are not redeemable.
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an exhibit to the Company's Registration Statement on
Form 8-A. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
4
<PAGE>
EXHIBIT 99.1
PRESS RELEASE
-------------
OPTICAL SENSORS INCORPORATED ADOPTS
SHAREHOLDER RIGHTS PLAN
Minneapolis, Dec. 4, -- Optical Sensors Incorporated (Nasdaq: OPSI)
announced today that it has adopted a Shareholder Rights Plan to protect the
Company and its shareholders from unsolicited attempts or inequitable offers to
acquire the Company. The Rights Plan has no immediate dilutive effect and does
not diminish the ability of the Company or its shareholders to accept a fair
offer for the Company.
To implement this Shareholder Rights Plan, the Company has declared a
dividend distribution of one Preferred Share Purchase Right on each share of
Optical Sensors Common Stock outstanding on January 8, 1997. Each Right will
enable shareholders to buy one one-thousandth of a share of the Company's Series
A Junior Preferred Stock at an exercise price of $90. The Rights will become
exercisable following the tenth day after: (a) a person or group announces
acquisition of 15 percent or more of the Company's Common Stock, (b) a person or
group announces commencement of a tender offer the consummation of which would
result in ownership by the person or group of 15 percent or more of the
Company's Common Stock, or (c) the Company's Board of Continuing Directors
determines that a person is an Adverse Person, as defined in the Rights
Agreement.
The Company will be entitled to redeem the Rights at $.001 per Right at
certain times as provided in the Rights Agreement. The Rights will expire on
December 2, 2006.
"This Rights Agreement is intended to protect our shareholders should
Optical Sensors become the target of hostile or unfriendly takeover tactics,"
said Sam B. Humphries, Chief Executive Officer. "It is designed to assure that
all shareholders of the Company receive a fair price for their Company shares in
the event of an acquisition of the Company and to make certain that all Optical
Sensors shareholders receive full and fair treatment in the event of an
attempted takeover." Mr. Humphries further stated that "the Rights Agreement was
not adopted in response to any specific effort to acquire control of the Company
and the directors of Optical Sensors are not aware of any such effort."
If, prior to redemption of the Rights, a person or group acquires 15
percent or more of the Company's Common Stock or, if a person or group acquires
12 percent or more of the Company's Common Stock and is determined by a majority
of the Company's "Continuing Directors" to be an "Adverse Person," then each
Right not owned by such a 15 percent shareholder or Adverse Person will entitle
its holder to purchase, at the Right's then current exercise price, that number
of Preferred Share Fractions (or, at the election of at least a majority of the
Continuing Directors, shares of Common Stock) of the Company having a market
value at that time of twice the Right's exercise price. In addition, if the
Company sells more than 50 percent of its assets or earning power or is acquired
in a merger or other business combination transaction in which it is not the
surviving corporation, the acquiring person must assume the obligations under
the Rights Agreement and the Rights will become exercisable to acquire Common
Stock of the acquiring person at the discounted price.
<PAGE>
Optical Sensors, through its SensiCath(R) technology, has developed and is
marketing a patient-attached, on-demand arterial blood gas monitoring system,
which provides precise, accurate and economical ABG results within 60 seconds
without depleting the patient's blood supply.
